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  • Writer's pictureRealFacts Editorial Team

Investing in Community: Paths to Economic Development

community development project

Creating economic growth and opportunity is often difficult and especially difficult when there is lack of equal access to capital and resources. Many across a variety of communities and cities across the country are feeling these effects. According to the U.S. Census Bureau, roughly 9% of Americans live in a persistent poverty census tract, where poverty rates have remained above 20% over the past 30 years. A lot of this has to do with a lack of opportunities and resources.

It seems like a daunting task to eliminate the gap but there are many high-impact ways that you can contribute to community economic development. Chike Ohayia, VP of Intermediaries Lending at JPMorgan said “when you have an awareness of your community and the way money flows, you can be an advocate for benevolent change. Contributing to community economic development gives you equity in the solution, and everyone should feel like they have equity in their community.” We will analyze four ways to get involved and illustrate how working with institutions investing in underserved communities can boost impact.

Supporting economic development projects is a great way to get involved. It often takes a lot of people working as a team to be able to finance a project that will create economic opportunity in an underserved community. It also requires multiple types of capital to finance, including equity, debt and grants.

Connecting with a community development financial institution (CDFI) is a great way to identify projects with great potential who are in need of financing. CDFIs play a critical role in supporting underserved communities by providing capital to develop affordable housing, community facilities, and small businesses. Ohayia said, “when you’re investing in a project that’s also receiving financing from a CDFI, it typically means you’re getting that social impact and working with a solid team that is mission-aligned and has experience in development.” CDFIs are very experienced in these types of projects and have a deep understanding of what it takes to be successful meaning that the projects they invest in have great potential and a high success rate. Ohayia suggests reaching out to local CDFIs and letting them know about the projects that you would like to support and the type of financing you’re looking to provide, either debt or equity.

Investing in CDFIs is a great investment idea especially as the CDFI industry is growing rapidly, both the number of CDFIs and their total assets which has tripled between 2018 and 2023 according to a New York Federal Reserve Bank report. Most CDFIs saw an increased demand in 2023 but only 40% of them could fully meet the demand showing a great need for investments from investors.

Individuals are able to help CDFIs deploy more capital by investing in loan funds at local CDFIs or CDFIs operating on a national scale. LIIF and Enterprise Community Loan Fund are 2 great examples. Ohayia said that “loan fund capital is very catalytic for CDFIs. The goal is for these CDFIs to have as flush a liquidity base as possible so they can provide support—either financial or technical—to projects and initiatives as consistently as possible.” Investing in CDFIs is great for people wanting to help community development but either prefer a hands-off role or aren’t super informed on community development projects.

Grants provide organizations active in community economic development much needed capital allowing them the flexibility in the projects they support. A CDFI could use a grant as a backup for an affordable housing development that needs additional collateral, in case costs run over. There are two types of grants, unrestricted and restricted grants. Unrestricted grants give the organization flexibility to choose how to best use the funds. Restricted grants allow donors to designate funds for a specific project or type of project that aligns with their philanthropic goals. Additionally, donors can opt to give funds with temporary restrictions that will later convert to unrestricted funds.

There may be some wanting to contribute to the community’s economic development but aren’t able to contribute financially. However, that isn’t the only way to contribute. Experts can offer education and technical assistance. Depending on your skills and background, that could include speaking at seminars or holding workshops. There is even the possibility to consider one-on-one mentorship, similar to small business consulting.

There are numerous ways to get involved and contribute to your community's economic development, whether through financial contributions or by sharing your personal expertise and experience. CDFIs are on the rise and represent a great investment opportunity, offering potential returns while also helping those in need.


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